Convergence or Divergence? Analysis of Regional Development Convergence in Hungary

Abstract The enlargement of the European Union (EU) led to an increase in regional development differences, challenging the EU structural policy. Whilst there are numerous papers discussing international and cross-EU development convergence, the issue seems under-researched at national level, especially when small territorial units are considered. This paper aims to partially fill this gap by using low aggregation (Local Administrative Unit 1, LAU1) territorial data between 2002 and 2013 a period that comprises Hungary’s EU accession and also the years of the recent Global Financial Crisis. We employ a novel approach to circumvent the lack of income, productivity or competitiveness data at LAU1 level by deriving two Regional Development Indices (RDI) resting on the estimation of internal migration functions. Once the RDIs are estimated, we proceed to a test sigma, beta and unit root convergence. Our results point towards regional divergence with rather bleak consequences for Hungarian and indeed European cohesion aims.